Consistent accounting method and revenue neutrality supported deletion of sales addition not recorded in profit and loss account.

A consistently accepted method of accounting and revenue recognition could not be disregarded where the same transaction pattern had been accepted in earlier scrutiny assessments and no contrary finding was recorded for the relevant years. The claimed sales were also offered to tax in a subsequent year, so the matter was revenue neutral. On those facts, the addition for sales not included in the profit and loss account was not sustainable and was deleted.

---

---

Issues: Whether the addition of Rs. 5,59,00,000 made on account of sales not included in the profit and loss account was sustainable in view of the assessee's consistently followed method of accounting and the plea of revenue neutrality.

Analysis: The assessee's accounting method had been accepted in earlier years, including scrutiny assessments, and no contrary finding was recorded for the years reflected in the record. The same transaction pattern and method of revenue recognition had been consistently followed, and the overall amount had also been offered to tax in a subsequent year, making the exercise revenue neutral. In these circumstances, there was no justification to disregard the consistently accepted method of accounting and sustain the addition for the year under consideration.

Conclusion: The addition of Rs. 5,59,00,000 was deleted and the issue was decided in favour of the assessee.

---